Clarke writes: "After decades of skyrocketing tuition and stagnant wages, American students and graduates now often owe significantly more on their student loans than their degrees are - in dollar terms - worth."

Student loan debt is now larger than credit card debt in the United States. (photo: Nastassia Davis)

The Case for Student Loan Forgiveness

By Rep. Hansen Clarke, Reader Supported News

26 April 12

he financial tidal wave of 2008 left millions of American homeowners "underwater," owing more on their homes than their properties are worth.

This has decimated consumer demand and destroyed countless dreams.

Yet homeowners are not the only group of Americans who find themselves "underwater." After decades of skyrocketing tuition and stagnant wages, American students and graduates now often owe significantly more on their student loans than their degrees are - in dollar terms - worth.

This week, President Obama took a decisive stand for students, fighting to prevent a three-point hike in interest rates on federally-subsidized Stafford loans. Over the past several months, he has also proposed an accelerated income-based repayment program and new incentives for states to contain costs. These are steps in the right direction. But we need more decisive action to get America's "underwater" students and graduates back on dry land.

The ever-growing cost of getting a degree is at the heart of the problem. Public institutions, where a majority of students are educated, have steadily increased tuition as public financing has declined. Amidst unprecedented state budget cutting, average public tuition increased by an astounding 8.3 percent in 2010 alone.

With many of their parents facing pay cuts or unemployment, students have had to take out more and more loans to cope with these quickly rising costs. The average borrower graduating from a public or private institution owed an unprecedented $25,250 according to recent figures. Americans' outstanding student loan debt obligations now exceed $1 trillion.

The problem is not just the immensity of the debt. It's the scarcity of opportunity for borrowers.

While the unemployment rate for new college graduates stood at 9.1 percent in late 2011, a recent Rutgers University study found that only 53 percent of a random sample of recent graduates of U.S. four-year universities were holding full-time jobs. Even fewer were making use of their university-level skills.

That explains why delinquency and default rates for student loans are rising sharply - even with income-based repayment programs in place. Students who studied hard, played by the rules, and are now desperate to find work are being denied basic opportunities and are, accordingly, falling behind on payments. They are finding that their degrees, like homes at the height of the real estate bubble, were vastly mispriced assets that are now hard to finance. Yet, unlike the debt from a home bought in the boom years, it is impossible to walk away from the debt incurred by getting a degree. A student borrower cannot discharge or even refinance their debts in bankruptcy, regardless of how desperate his or her situation becomes. And, if a student borrower does default, he or she will face perpetually rising interest rates and compounding fees with no hope of escape. Mike Konczal, a prominent blogger, has rightly called this "modern-day indentured servitude."

We must set these students free.

This month in the U.S. House, I have proposed H.R. 4170 - The Student Loan Forgiveness Act of 2012 - which would eliminate many of the awful consequences of educational indebtedness. In doing so, it would give Americans greater purchasing power, helping to jumpstart our economy and create jobs.

The bill provides full loan forgiveness for current borrowers who have paid the equivalent of 10 percent of their discretionary income for 10 years or who are able to do so over the coming years. It moreover caps interest rates on federal student loans at 3.4 percent and enables existing borrowers to break free from crushing fees by converting many private loans into federal loans.

Crucially, Americans who are behind on their payments due to a setback such as unemployment or illness would be eligible to enroll in the new program. The bill seeks to ensure that no one would be consigned to "indentured servitude" because of a stroke of bad luck.

To control costs and create prudent incentives for both students and institutions going forward, the bill allows future enrollees in the program to receive forgiveness up to a limit of $45,520 after paying up to 10 percent of discretionary income for 10 years. Under the bill, both current and future borrowers could still opt for the benefits of the existing income-based repayment program as an alternative.

If you support this solution, please join the movement by signing your name at hr4170.com. Also, please consider asking your Representative in Congress to sign on as a co-sponsor.

For at least a century, this country has run on an implied social contract that says "if you study hard and work hard, you'll have a steady middle-class income and a stable career."

Let's reinstate that contract and put student borrowers back on higher ground.

Comments

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If all schooling is free then many people will take more classes, leading to higher costs and shortages for the people that really need a certain class. Even if it's free to you, there are still costs involved.

I'm a "senior citizen" from way back; I got my bachelor's degree so long ago that it was totally free! Zero tuition. Public, of course. I went on to a professional career, which has kept me paying thousands of dollars in income taxes every one of those many years. The country got back tons more money than my college education cost to my alma mater (and its funding source). The current condition of soaring tuition rates and public funds dry-up is condemning an entire generation of youth to the pits of existence.

then why are we the only advanced capitalist country in the world that does not have a free higher public higher education system? of course there is a cost but it is a social cost just as the benefits of having an educated population are social benefits and that's what tax dollars are supposed to be for and not spending a trillion dollars a year on a totally unproductive and totally destructive military industrial complex/national security/ war state. Again, look at the states that had free higher education systems such as California and New York...they were paid for out of tax dollars but the benefits were educated relatively well paid workers who then paid taxes back into the system to fund the educational system for the next round of students. And, you don't think there is a "cost" to having an uneducated, unemployable population? This is (one of) the problems with mainstream economics i.e., it never accounts for what they call "external costs" and thus are presented with a completely false economic picture of what things really cost. Finally, you seem to be suggesting that it is a bad thing for people to "take more classes" i.e., ofr people to want to keep adding to and upgrading their education...how do u then maintain an employable and competitive work force not to mention a population that doesn't deny basic science like evolution or climate change and who are thus ripe to buy into the crap they are being fed by the Becks, Palin's, FOX news etc.

Let's demand all our tuition REPAID with interest and then we may have to SETTLE for something less by beginning aa class action law suit, because STUDENT LOANS FOR HIGHER EDUCATION IS A FRAUD PERPETRATED BY BANKSTERS! http://readersupportednews.org/pm-section/256-justice/9233-instead-of-signing-pledges-to-refuse-to-pay-student-loans-join-a-class-action-f-law-suit-to-demand-all-university-college-etctuition-back-with-interest

Students are already organizing to get a million students to sign a pledge not to repay their student loans...this is a campaign that we should be supporting instead of calling for such things as a class action suit so we all get our tuition back (does this include students in the 1930s, 40s, 50s, 60s?...how far back would u take this?) which will never happen and defeats the purpose of developing a real organizing campaign to create a social movement in this country around this issue...social movements are the only thing that have ever brought real change in this country....Do we really believe the US government will go after 1,000,000 students...if so, then we should piggy back to support them with campaigns to stop paying mortgages and credit card debt...debt has become a social weapon and the answer is not a lawsuit but to organize millions to just stop paying the F'ing debt back. This would transform the nation overnight instead of some unrealistic lawsuit that even if it did not get thrown out immedidately would be tied up in court for years if not decades and thus would not do current (let alone future) students any good what so ever.

dkonstruction: The government will, they will create legislation taking away the rights of the students and refusing them passports or other punitive legislation... the banks will obtain judgments and make an example of several thousand and then allow amnesty for those who get back on track...

I agree if this is done by individuals or even a small number of people...that is the point of a campaign to get a million students to do this (and there is no reason to stop at a million)...it is like with any civil disobedience campaign or mass movement of any kind...we have strength in numbers...at a certain point, when enough people do not consent the state has a problem...this was my objection to dealing with the foreclosure crisis (i have worked for non-profit housing organizations for the past 20+ years and so have been dealing with this "on the ground" very directly)...if individual homeowners try and go up against the banks 99.99 times out of a hundred the banks (or in the case of the GSE's..the state) wins...but had there been an organized campaign to either stop paying mortgages and or occupy vacant foreclosed properties and defend those who are facing foreclosure (as has been done in cities around the country though on a far too limited scale) i think that the foreclosure crisis would have played out very differently (and we are only maybe 1/2 way through this one so there is still time for actions)...at the very least, these types of tactics, like those of the Occupy Movement change the discourse and get people thinking that Margaret Thatcher's TINA (there is no alternative) is bull#@$% and that it is not rocket science...there are lots of altnatives...some which we don't need the courts or gov't permission to simply implement ourselves.

In my opinion, it's time to stop usury, which I believe is charging excessive interest on owed money; and I also think it's time to stop charging any interest at all for the use of money. What kind of a new economy would result from this I'm not sure, but it would surely cure a lot of present ills. I think the most important effect would be that the corporate capitalists who put together humungous projects like that damn dam in Brazil for example would no longer be able to do it because without paying interest (using borrowed money even for that) they wouldn't be able to get enough capital together to commit such humungous crimes to begin with and thus we'd all be much better off -- especially the people and animals and vegetation and general ecology of the area being decimated. For what? Merely for profit. And that is all based on charging interest on borrowed money. Where's the love?

Back in the 50s and 60s when the US was a growing nation, higher education in public colleges and universities was free in some states and nearly free in most. The idea then was to increase the level of education of all Americans. It is no longer that way.

The whole nation benefits from better education. This should be a social good.

"For at least a century, this country has run on an implied social contract that says "if you study hard and work hard, you'll have a steady middle-class income and a stable career."

THis was actually always a radical idea but one that was believed in by many.

Now the mantra of the US is Debt Peonage. In fact, debt peonage is what the owners of the US -- the ruling elites -- always thought the implicit implicit social contract was.

College education was once a way out of debt peonage, but today it is a route into debt peonage.

If education is free there will be a lot fewer students admitted, because there is no honey pot to pay for advanced education in ,most states. Thanks to scholarships, education is free today for the best students. The problem arose because we are sending too many people to college. Practically anyone can get into some college somewhere, that is the root cause of the mess.

If education is free there will be a lot fewer students admitted, because there is no honey pot to pay for advanced education in ,most states. Thanks to scholarships, education is free today for the best students. The problem arose because we are sending too many people to college. Practically anyone can get into some college somewhere, that is the root cause of the mess.

==========I returned from four years in the military in 1975 -- worked at crappy jobs for a while and then attended BSU in the early 80s. The GI Bill at that time required completion of studies within 10 years of DOS (when I left the service). I was able to LIVE on the GI Bill and still save enough for tuition and books each semester without having to work at the same time. I'm afraid those days are gone forever. I don't think the ruling elite wants well-educated citizens. It makes them tougher to manage when they're not so gullible. As 5/8 of an Economics major, I can assure you that if education is free, there will be MORE students admitted; not less. It's the most fundamental rule of supply and demand. Scholarships are only available to a tiny percentage of students. It's a myth to think that scholarships alone will be sufficient. We're already being left behind by other -- better educated -- countries. Quality education is key. Don't let the anti-intellectual crowd eat your brain.==========sail4free==========

Bravo, Maverick. I whole heartedly agree. In New York State, when my older brother was in college in the 1960s higher education was completely free!!!! Studies that have been done since tuition was instituted have also shown that the cost of administering this system (i.e., collecting the tuition..processing the loans, servicing the loans etc) is actually more costly for the state and society as a whole than the cost of the state completely subsidizing higher education.

"As 5/8 of an Economics major, I can assure you that if education is free, there will be MORE students admitted; not less. "

And what would be wrong with that. Even some college experience is better than none. There would still be entrance requirements and a grade point average to remain in a program. Colleges are now under such financial pressure that they must do everything to retain tuition paying students who should probably flunk out.

And US colleges are going after foreign students like crazy because they pay full tuition with no need based scholarships. I can see the day when some of the best colleges in the US are mostly foreign students. It is already that way in grad schools in science.

The rulers of this nations are really just short sighted. They send infinite amounts of money into war and weapons but invest very little in education.

Midwest Tom, As i replied to your post on student debt in the last piece RSN published on this topic the problem did not arise "because we are sending too many people to college" but because the state (i.e., both federal and state governments) dramatically cut their investment in higher education and began the privatization of its financing. Just look at the history of California which used to have a miserable economy and very high rates of poverty until (under both democratic and republican administrations) they made massive public investments in higher education and developed what was considered the best public higher education system in the country and as a result their economy became one of if not the best and fastest growing in the nation. Investment in higher education reaps huge social returns unlike investments in the military industrial complex economy (and now the national security state) that reaps nothing but madness, death and destruction and ultimately zaps resources from the productive economy (in the same way that "financialization" of the economy i.e., the transfer of investment from the "real" economy to "money" i.e., banking, stocks, etc destroys the productive base of our society and created an economy based on low-wage, unskilled job ladderless service jobs that simply further faciliate the massive transfer of wealth from the bottom to the top (what is now being called socialism for the rich).

It used to be that a diploma from a public high school would be enough to get a manufacturing or clerical job that would earn you a stable middle-class life. This meant that Americans educated Americans to br productive, debt-free wage-earners. That was good for everyone. After WWII, returning GIs took advantage of the GI Bill and low tuition to get higher education and live better debt-free lives. Today a college degree is a requirement for many, many available jobs, so a young person is obligated to mortgage his future just to gain access to a future. America was stronger when Americans could build their own lives without having to go into debt just to reach the starting line.

==========A big part of the problem -- not even mentioned in the article -- are the relatively new for-profit colleges. These scammers only have 10% of the nation's students but receive 90% of student loan proceeds. Their predatory practices designed to get anyone with a pulse to sign a contract are legendary. In a nation which properly regulated such industry, their actions would be criminal. An acquaintance of mine graduated top of her class as a "Surgery Tech" only to learn her school is not certified. She still has to pay back the $28,000 though. Even the director of the federal Dept. of Education says he has no ability to forgive a loan -- even if the so-called "school" has been proven to be a fraud. Madness! ==========sail4free==========

We have to come to terms with the fact that debt has become a weapon of mass destruction and a means for social control...this was true for "third world" nations which was why there were campaigns to end this debt (which did not happen across the board but if you want to look at how to successfully deal with it look just look at Argentina who chose to default on their debt and after which experienced explosive growth rates and dramatically reduced poverty rates and increased the overall standard of living for the average Argentinian). The Italian Marxist Antonio Gramsci understood more than 3/4 of a century ago that capitalism does not just rule through oppression/repression but also needs our consent...when we stop consenting the system cannot function...in the case of debt refusal to consent means stop paying the debt (whether they be student loans, mortgages, car loans, credit cards..etc). To put all of this in a fascinating and important historical context, I highly recommend the recent book Debt: The First 5000 years by (anarchist) anthropoligist/professor David Graeber (for the record, i'm not an anarchist but one does not have to be an anarchist to read works by anarchists if it is a good scholarly work and this is by far the best history and analysis of history of debt I have yet seen)

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